Total 39 Posts


"Alt-A" stands for alternative 'A.' Alt-A mortgages are a classification of loans with more risk than prime ('A') mortgages but less risk than subprime ('B') mortgages. Canada's top alt-A lenders include the likes of Home Trust, Equitable Bank and First National Excalibur, to name a few. Alt-A borrowers include


An ARM is an Adjustable-Rate Mortgage. It's a floating-rate mortgage where the payment rises and falls with the lender's prime rate. With ARMs, the borrower's amortization remains constant as the prime rate goes up and down. An ARM is technically different from a variable-rate mortgage (VRM), which has a fixed

Base effects

"Base effects" refers to how economic values from a year ago affect the rate of change in economic data today. Take inflation for example. If inflation was high in the same month a year ago, that high value will drop out of the calculation when inflation is recalculated this month.


In the context of interest rates, as used here on, "bearish" refers to a downward influence. So if something is "bearish for rates" it means that it's likely to pressure rates lower, other things equal.

Bulk Insurance

Bulk insurance (a.k.a. portfolio insurance) is a specialized form of mortgage default insurance that lenders purchase for a portfolio of loans. Bulk insurance protects the lender from borrower defaults on a broader scale. It serves three primary purposes: 1. Risk reduction 2. Securitization (Liquid markets like the Canada


In the context of interest rates, as used here on, "bullish" refers to an upward influence. So if something is "bullish for rates" it means that it's likely to push rates higher, other things equal.

Contract Rate

The mortgage rate used to calculate a borrower's payments, as required by his/her mortgage contract.


What is CORRA? It's a question we get asked all the time, and it's not the easiest rate to explain. CORRA stands for "Canadian Overnight Repo Rate Average." It is a reference rate that's widely used in the Canadian overnight market. It measures the cost of overnight general collateral funding


“Dovish” refers to a type of monetary policy that favors lower interest rates and more stimulus to boost economic growth and employment. If the Bank of Canada has a dovish stance, it means it wants to make borrowing easier for consumers and businesses, which can increase spending, demand, and production.

Forward curve

In the bond market, the forward curve is a graphical representation of where traders think interest rates will be in the future. The forward rate curve is useful because it helps traders anticipate future interest rate movements. If the curve is upward sloping, it suggests that the market expects interest

Forward Rates

Forward rates are the market's calculated expectation of a bond's yield in the future. In a sense, they're like a financial time machine, providing a glimpse into what the market expects interest rates to be at specific points in the future. Forward rates are essential tools for investment strategy and

Four-year swap

If read a lot of mortgage rate commentary, you'll see Canada's 5-year yield continuously cited as a fixed-rate indicator. It's a handy rough guide to the direction of 5-year fixed funding costs—most of the time. Practically speaking, insured 5-year fixed rates approach 100% correlation with the 5-year government bond


TDS stands for "gross debt service." A borrower's GDS ratio equals his/her monthly cost of carrying a mortgage divided by total gross monthly income. In other words, it's the percentage of income needed to cover basic housing costs. Prime lenders commonly underwrite mortgage applications by assessing a borrower's GDS


GFC is an acronym for Global Financial Crisis. The GFC lasted from 2007 to 2009 and was the worst financial crisis since the Great Depression. Here's a timeline of its major events...


Short for "Government of Canada." "GoCs" refers to Government of Canada bonds.


A high-ratio mortgage has a loan-to-value over 80%, typically requiring default insurance.


Interpolation is the process of drawing an implied path between two known points. Interpolation is a common method used to create yield curves.


Loan-to-value (LTV) is a ratio that compares the amount of a mortgage loan to the value of the property. It is calculated by dividing the loan amount by the property's value or purchase price and multiplying by 100. For example, if you buy a home appraised at $200,000 for


Macroprudential policy refers to the use of regulatory tools to limit systemic risk in the financial system. In Canada, the primary policy tools employed in this regard are related to the residential housing market. Examples include higher down payment requirements and stricter mortgage qualifying rules.


MBS stands for mortgage-backed security. It is a type of investment. An MBS is basically a pool of mortgages sold to investors. Investors receive ongoing funds from the payments people make on their mortgages. Investors get the rest of their principal back when the MBS matures.


A MIC, or mortgage investment corporation, is a lending company that takes investor funds and lends them out on mortgages. MICs mostly serve non-prime residential customers, but many finance commercial projects and also prime borrowers with a need for fast flexible financing. MICs are a fixed-income investment that provides investors


A monoline is a lender that deals only in mortgages. In other words, it's got one (mono) line of products. Monoline lenders are generally not deposit-taking and they don't have branches. They tend to originate loans mainly through mortgage brokers. Examples of monoline lenders include First National, Merix Financial and

Neutral rate

The "neutral rate" is the theoretical monetary policy rate that keeps the economy operating at full capacity with no inflation pressure. In other words, it's the overnight rate that is considered to be neither stimulative nor restrictive for the economy. When the policy rate is neutral, inflation is stable at


National Housing Act mortgage-backed securities. NHA MBS is a government-sponsored way for lenders to generate funding for default-insured mortgages. NHA MBS are investments backed by pools of insured mortgages. Investors purchase these securities, which in turn provides issuers (lenders) with capital to lend against new mortgages. Investors receive monthly payments


OIS stands for overnight index swap. An overnight index swap is a bond market derivative that financial traders use for hedging and to speculate on the direction of central bank policy rates. In Canada, OIS rates equal the expected Bank of Canada overnight rate over a specific timeframe. For example,


PCE stands for "personal consumption expenditures." PCE is an inflation gauge which tracks expenditures on goods and services in the U.S. Core PCE is the primary inflation measure used by the Federal Reserve to guide its monetary policy.


When a mortgage is readvanceable, it means you can reborrow paid-down principal—typically from a line of credit linked to the mortgage.


TDS stands for "total debt service." A borrower's TDS ratio equals his/her total monthly obligations divided by total gross monthly income. In other words, it's the percentage of income needed to cover all debt payments. Prime lenders commonly underwrite mortgage applications by assessing a borrower's TDS ratio. Typically, lenders

Terminal rate

The terminal rate is the peak policy rate in a given rate hike cycle. The terminal rate is reached when a central bank stops tightening monetary policy—i.e., when it becomes clear that inflation is under control and expected to fall back to target.

Trigger Rate

A trigger rate is the interest rate at which your regular mortgage payment no longer covers the interest due. This applies to borrowers who have variable-rate mortgages with fixed payments. When the Bank of Canada raises interest rates significantly (e.g., 275+ basis points), many borrowers will see their variable


VRM is short for variable-rate mortgage. It's a floating-rate mortgage where the payment remains fixed, despite increases and decreases in the lender's prime rate. With VRMs, the borrower's amortization extends as rates increase and shrinks as rates decline. In 2023, some VRM borrowers saw their effective amortizations extend well beyond
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